Reliance Industries (RIL) has written to the power ministry that NTPC’s reluctance to conclude the gas sale purchase agreement (GSPA) with it would increase the state-owned power company’s cost of power by Rs 15,000 crore over ten years ifit imports re-liquefiednatural gas (RLNG).
M S Prasad, executive director of RIL, in a letter on Monday to power secretary H S Brahma, wondered why NTPC was not ready to discuss the GSPA for the existing Kawas and Gandhar power plants when the ongoing litigation related only to their proposed expansion.
“RIL having agreed to sign the GSPA with this caveat that the GSPA would be without prejudice to the ongoing matter that is sub judice, it is indeed strange that NTPC does not want to discuss the GSPA for the existing Kawas and Gandhar plants,” he noted.
NTPC has been allocated 2.7 mmscmd of gas by the government for its plants at Faridabad, Dadri, Anta, Kawas and Gandhar. However, the public sector power unit has not yet entered into a GSPA with RIL owing to the dispute over gas price.
Prasad complained to ministry that despite several rounds of discussions with NTPC for finalisation of contract for supply of gad, his company has failed to evoke response.
“In our meeting with NTPC on August 12, all issues relating to finalisation of GSPA were resolved and NTPC was to revert after obtaining internal approval. However, we are still awaiting formal response from NTPC despite regular follow-ups,” wrote the RIL executive.
He pointed out that even as NTPC was hesitant in signing a contract, the Mukesh Ambani company had succeeded in entering into a GSPA with more than 35 customers in power, fertiliser, steel, CGD, LPG sectors.
“NTPC is yet to buy KGD6 gas, which is currently not only the cheapest but has already enabled power companies to reach 90% PLF (plant load factor),” states the letter.
Prasad accused NTPC of rejecting cheap gas from RIL and other Indian gas companies and buying costly fuel from overseas players, which will eventually increase its cost of power. This, he said, will make electricity costlier for the common man as state electricity board (SEB) would purchase power at higher price from the PSU.
“It is indeed ironic that NTPC is now planning to purchase the same RLNG knowing fully well that the RLNG price is stated to increase from January 9,” he said.
Prasad said that the contracted price formula for the RLNG is linked to the prevailing price of crude oil without any cap, unlike the price formula of KGD6 gas where the price is capped at $60 per barrel.
“At an assumed price of $ 60 per barrel for crude oil, the average ex-terminal price for this RLNG over ten years works out to approximately $9.4 mmBtu, resulting in delivered price $11.2 per mmBtu,” he estimated in his letter.
The RIL executive said that with the average price of crude oil over the next four years being projected at $ 80 per barrel, the RLNG price would be even higher.
Against this price, Prasad said RIL’s KGD6 gas price, as approved by its price formula is $4.2 Mmbtu, which result in delivered price of $6.5 mmBtu. He further said NTPC decision to “forego KGD6 gas and buy RLNG cannot be ascribed to the ongoing litigation” between it and RIL.
“RLNG is being purchased for its existing plants whereas the ongoing litigation pertains to the proposed expansion projects at Kawas and Gandhar,” he said. Prasad estimates the PSU’s decision to not go for RIL gas and buy 2.5 mmscmd RLNG for ten years increase its cost of power by Rs 6000 crore in ten years. Additionally, NTPC buys about 3 to 4 mmscmd on spot basis, which could lead to prices shooting up by another Rs 9000 crore.
“Thus, the total potential increase in cost of power by NTPC’s decision to buy 6 mmscmd RLNG instead of RLNG could be about Rs 15000 crore, which will be borne by SEBs and common man,” he said.
Prasad, therefore asked the power ministry to intervene in the matter in the interest of the power consumers. “The benefit to NTPC, the SEBs and common man being apparent, the ministry of power may like to make such intervention as may be considered necessary.
Comments